Although the German offer, at 26 euros per share, is higher than two competing bids, it isn't expected to bring an end to the month-old bidding war being waged over the Spanish electricity producer. As the smallest of Spain's four electricity companies, Hidrocantabrico is seen as offering foreign utilities a foothold into one of Europe's faster growing electricity markets.

Did German Utility RWE Overbid for Cantabrico? (Feb. 7)

Competing Bids Emerge for Spain's Cantabrico (Feb. 7)

On the table is an offer of 24 euros per share from
Electricidade de Portugal SA
for 100% of Hidrocantabrico and another one of 19 euros per share from Ferroatlantica SA of Spain for 25% of the Spanish utility. Though the offer from RWE is higher, EDP said its bid offers Hidrocantabrico's shareholders better value in the long term. Hidrocantabrico's share price on Wednesday rose 13 European cents to 16.10 euros.

"Shareholders shouldn't look at price only," said Rui Horta e Costa, the chief financial officer at EDP, in a phone interview. "The creation of a pan-European electricity market is going to take time, but regional markets will be faster. In three or four years, there will be a single Iberian market and we will be the second-biggest player."

In contrast, he said, RWE won't be able to take advantage of the linkup with Hidrocantabrico because of geographic barriers.

Another offer of 25.80 euros per share from Ferroatlantica, the energy and metals unit of the Villar Mir industrial group, was rejected last month by regulators because its success was conditional on winning 60% of the shares outstanding.

Under Spanish takeover law, Ferroatlantica now has the right to make a new and final offer for Hidrocantabrico at a minimum of 27.30 euros per share. Even if Ferroatlantica, which has the backing of
Energie Baden-Wuerttemberg AG
of Germany, does outbid its competitors, analysts said it isn't clear whether its bid would win. A spokesman for Ferroatlantica said the company was studying its options and had a month to decide its course of action. "We haven't backed out yet," he said.

The bids of both RWE and EDP have the support of key Hidrocantabrico shareholders. In the case of EDP, 35% of Hidrocantabrico's shareholders have pledged their support, including regional savings bank Caja de Ahorros de Asturias and TXU Europe PLC, the British unit of
TXU Corp.
of the U.S.

"We have the support of 35% of the shareholders," said Mr. Horta e Costa of EDP. "We will try to build on that base."